Converting from Chapter 11 to Chapter 13

I have been keeping funds to pay for secured mortgage in my Chapter 11 case in bank accounts. My attorney asked me to set up this account for my mortgage. We have not gotten an approved plan and now I want to convert to a Chapter 13. Will the trustee take away the funds in the accounts if I convert?

These funds are "property of the estate" but might not be included for the Chapter 7 liquidation analysis. Check with your attorney; this isn't necessarily a simple issue.

The legal analysis of any situation depends on a variety of factors which cannot be properly represented or accounted for in a response to an on-line question. Any answer, discussion or information is intended as general information only, is not intended to serve as legal advice or as a substitute for legal counsel, and should not be relied upon in making any decision. If you have a question about a specific factual situation, you should contact an attorney directly.

There are specific rules that govern converting from one chapter to another. The conversion from 11 to 13 is not automatic. In either 11 or 13 you are required to fund a plan to pay your creditors. Creditors are entitled to the value of your assets. Please discuss these important issues with your lawyer. We can not second guess your lawyer. Your lawyer know the details of your case and is the best person to answer your questions and make recommendations.

Karen J. Porter is licensed in the State of Illinois. An answer to a question on this site does not create an attorney client relationship. It is recommended that you meet with an attorney to receive a thorough and confidential review of your legal problem.

My bigger concern is if you are in a Chapter 11, why not confirm a Plan written to do exactly what you want and how you want it?

A Chapter 13 at this point would mean you would have to pay for the Chapter 11 + you would have to pay the trustee tens of thousands more. That does not make financial sense.

My other concern is why you don't turn to your current attorney for advice. If you don't trust him/her any longer, I recommend that you visit with other Chapter 11 attorneys for a consult. There are many attorneys who try Chapter 11 work for practice and you may be stuck in one of those situations. There is a big difference between attorneys who regularly practice in Chapter 11 and those that dab in it.

Be sure to designate "best answer." If you live in S. California, you may call my firm for a consultation 818-507-6000. The above is general legal and business analysis. It is not "legal advice" but analysis, and different lawyers may analyse this matter differently, especially if there are additional facts not reflected in the question. I am not your attorney until retained by a written retainer agreement signed by both of us. I am only licensed in California. See also avvo.com terms and conditions item 9, incorporated as if it was reprinted here. Please visit my web site: www.tilemlaw.com for more information about my services.

It depends on what you mean by will the trustee "take away" the funds. They are not yours to keep.

Here's what I mean - you said you set aside the money to pay a creditor (the mortgage). You should have already reported these set-aside funds in your Chapter 11 monthly operating reports. So the court system already knows about them.

Here's what you can do - in your Chapter 13 plan, you can propose that these funds be used for that purpose, and the trustee may agree. What you can't do is go splurge these funds on yourself or your family.

I agree with the vast majority of what my colleagues have already said. I just thought it may be helpful to expound on an issue that Ms. Porter raised. Conversion from Chapter 11 to Chapter 13 is not automatic. You must move the Court to convert - the Court will then evaluate what is in 'the best interest of your creditors' - the Court can then decide to dismiss you case, have you remain in Chapter 11, convert your case to either Chapter 7 or 13 (if you qualify for either), or appoint a trustee in your current Chapter 11 - whatever the court deems is in the best interest of your creditors.